The great British gold rush

MINISTERS today face calls to create a new strategy to help struggling British businesses lock into lucrative new markets across the world. With the eurozone crisis deepening and growth in the so-called Bric (Brazil, Russia, India and China) countries slowing, the Confederation of British Industry called on the Coalition to champion leading UK sectors within the next generation of nations tipped for economic supremacy in the 21st century.

An estimated £30billion worth of new trade could be unlocked by forging links with emerging markets from Mexico to Indonesia and Turkey. Frontier markets in democratic African states and even the Middle East could also offer fresh hope to the struggling British economy.

The CBI said ministers should champion Britain’s automotive and aerospace companies along with our chemical and pharmaceutical firms and our creative industries.

Katja Hall, CBI chief policy director, said: “Official data has recently shown more firms are dipping their toes into emerging markets but there is scope to make ever bigger inroads. It is critical the Government develops a coherent industrial strategy which could deliver a £30billion export boost by 2020.”

The Government has come under fire for being over-reliant on exports to the European Union and slow to cash in on the booming Bric countries. However, in 2012 Britain turned a corner and, for the first time in 40 years, official figures show that more British goods are being exported to non-EU countries than to member states. At the same time the Bric countries are beginning to show signs of succumbing to the aftershocks of the 2008 credit crunch .

It is critical the Government develops a coherent industrial strategy which could deliver a £30billion export boost by 2020

Katja Hall

Brazil is forecast to grow by just 1.7 per cent this year as high inflation and soaring wages take their toll. India is underperforming and even China has been forced to downgrade its growth forecasts, albeit to a still enviable 7.8 per cent.

This puts pressure on the Department for Business, Innovation and Skills not to drag its feet on locking into new emerging markets ripe for UK export which could take up the slack from slowing Bric economies.

Jim O’Neill, chairman of Goldman Sachs Asset Management, coined the term Brics a decade ago and believes these countries remain key players. However, they are no longer the only game in town . Last year, in his book The Growth Map, he named the “Next Eleven” as Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam.

Philip Booth, programme director of the Institute of Economic Affairs, said the riots on the streets of Greece last week were a painful reminder the EU was no longer a safe option.

“The level of indebtedness in many European countries is such that you can imagine a Greek situation occurring in many European countries, bar Germany and a handful of northern European states. Few European countries are completely safe from that,” he said.

“However, the problem is many of the new emerging markets are very diverse. The thing with the Brics is they were very large. India and China, for example, together made up a third of the world’s population, whereas many of the new emerging markets may be spread across smaller countries.

“That makes things very useful for a portfolio investor but less ­helpful for a small manufacturing company considering investment on one site.”

However, the political realities make some countries more primed for canny British businesses than others. While Iran is clearly out of the running and increasing political turmoil in Egypt, Nigeria and Pakistan raises doubts, experts suggest long-term growth and political stability is achievable elsewhere.

Mexico was hard hit in 2008 but Latin America’s second largest economy is now on the rise. It saw strong four per cent growth last year and is on course for a similar result in 2012. It is grabbing some of ­Beijing’s market share in America as rising labour costs in China close the wage gap between the two nations.

High oil prices are boosting ­Mexico’s public finances and foreign investment reform is promised. This relative wealth has seen a stampede of investment from the car industry, with Ford, Nissan, VW and General Motors helping to pour nearly £4billion into Mexico in two years.

If the economy does not overheat, and for some that remains a big if, there is a booming consumer sector waiting to be tapped into. Credit levels are low in Mexico and GDP per head is 10 times that of India. Consumer credit is expanding at 19 per cent a year and retail sales are up to pre-crisis levels as the domestic economy starts to rev its engines.

During the Asian financial crisis of the late Nineties, Indonesia and the Philippines were bailed out by the International Monetary Fund.

By 2011 both countries were getting credit upgrades from the ratings agencies and in 2012 they came of age, each repaying £600million into the IMF pot. With strong growth and fast rising household incomes they are the new Asian Tigers.

While China’s one-child policy introduced in 1979 is a demographic time bomb, (its working age population will peak in four years), the Philippines working-age population will continue to rise right up to 2050.

The Philippines and Indonesia both have stable elected governments, solid banking systems, ­enviable ­deficits and strong enough reserves to withstand a run on their currency. both also support a growing middle class keen to spend on new cars and white goods.

While much of the African continent remains bedevilled by corruption, autocratic rule and poverty, multi-party democratic stability and rising consumerism are making some of its states the new ­frontier for British business.

Ghana is seen by many as among the most politically stable prospects for consumer-related sectors to target its relatively young population of more than 20 million. Offshore oil production began in 2010, pushing growth the following year to an impressive 14 per cent. Its newfound wealth presents opportunities for Britain’s financial sector to invest in a major infrastructure roll-out.

Closer to home, Turkey is hotly tipped after years of structural and political reform which has opened the door to foreign investors. While heavy trade in Europe has kept growth modest, the Middle East remains a key trading partner for Turkey making this a crucial gateway nation if the Arab Spring eventually brings political stability to the region.

Its potential has already been spotted by AkzoNobel, the world’s largest paints and coatings company and home to iconic brands Dulux, Cuprinol and Polycell. It has five factories and almost 900 staff in Turkey to cash in on £1.6billion paint and coatings industry. This grew more than 15 per cent last year, twice the rate of the ­country’s economy.